Madison Investments, an investment management firm, released its “Madison Investments U.S. Equity Strategy ” Q4 2023 investor Letter. A copy of the same can be downloaded here. In 2023, the US stock market experienced a positive year. The S&P 500 Index ended 2023 up 26.3%, having recovered all of its 2022 decline and a little bit more. The year’s most notable feature was the glaring concentration of returns in the Magnificent Seven. With an average annual return of 111.7%, these seven megacap technology firms accounted for considerably over half of the S&P 500’s entire gain. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Madison Investments U.S. Equity Strategy featured stocks such as Analog Devices, Inc. (NASDAQ:ADI) in the fourth quarter 2023 investor letter. Headquartered in Wilmington, Massachusetts, Analog Devices, Inc. (NASDAQ:ADI) is a semiconductor company that designs and manufactures integrated circuits (ICs), software, and subsystems. On February 16, 2024, Analog Devices, Inc. (NASDAQ:ADI) stock closed at $188.24 per share. One-month return of Analog Devices, Inc. (NASDAQ:ADI) was -4.60%, and its shares lost 2.32% of their value over the last 52 weeks. Analog Devices, Inc. (NASDAQ:ADI) has a market capitalization of $93.343 billion.
Madison Investments U.S. Equity Strategy stated the following regarding Analog Devices, Inc. (NASDAQ:ADI) in its fourth quarter 2023 investor letter:
“In the semiconductor industry, demand is closely tied to the economic cycle, and industry order patterns are magnified by its complex supply chain. Furthermore, it’s a capital and technology intensive industry, resulting in frequent overcapacity and product obsolescence. For these reasons, we shied away from any investment in the industry for many years. However, several years ago, we felt that segments of the industry had developed strong enough moats to merit investment under the right conditions. We made one investment (Analog Devices, Inc. (NASDAQ:ADI) in Large Cap) that we thought was compelling, but it wasn’t until late 2021 when the semiconductor industry entered a severe downturn, that we began purchasing semiconductor stocks in earnest. Our view on the cycle risk was simple – the long-term growth outlook was tremendous given the proliferation of electronics and software in everyday objects, and the downturn had already begun, and a healthy amount of it was known. We ignored the near-term outlook for profits, assuming they would be down substantially. It turned out that the downturn was more severe than most other investors or industry observers had forecasted. Thus, semiconductor stocks in general remain depressed, and our investments have so far shown mixed results.
However, we have not changed our view on the long-term attractiveness of the industry segments in which they operate, nor on the normalized earning power of these companies five to ten years out. Thus, we have been consistently adding to our exposure for the past two years, which, in addition to Analog Devices, now includes Microchip Technology (Mid Cap), MKS Instruments (Mid Cap), and Texas Instruments (Large Cap), the last of which was a new purchase in 2023. Each of these has wide and deep moats, top-notch management teams, and strong secular growth prospects. We expect our investments here to ultimately work out for us, but they are examples of how unpredictable, cyclical factors can overwhelm other factors in the short term.”
A technician overseeing an application-specific integrated circuit design, etched on a metallic plate.
Analog Devices, Inc. (NASDAQ:ADI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Analog Devices, Inc. (NASDAQ:ADI) was held by 62 hedge fund portfolios, down from 64 in the previous quarter, according to our database.
We discussed Analog Devices, Inc. (NASDAQ:ADI) in another article and shared the list of most valuable semiconductor companies in the world. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
